Zetwerk’s 15.86% promoter stake requires investor lock-in

Zetwerk’s promoters hold 15.86% of fully diluted pre-offer equity capital, leaving them below the 20% of fully diluted post-offer capital that must be locked in as minimum promoters’ contribution. Eight specified outside shareholders, together holding 684,893,300 shares or 44.54% pre-offer, have consented to provide shares for the shortfall.

Why does Zetwerk’s 15.86% promoter stake require investor support?

Zetwerk’s promoters cannot independently meet the required 20% minimum promoters’ contribution because their post-offer holding will remain below that threshold. The red herring prospectus identifies Amrit Pratik Acharya and Srinath Ramakrushnan as the two promoters, holding 115,526,710 and 128,355,830 equity shares respectively. Their combined 243,882,540 shares represent 15.86% of Zetwerk’s fully diluted pre-offer equity share capital.

The requirement is set out in Regulations 14 and 16(1) of the Securities and Exchange Board of India Issue of Capital and Disclosure Requirements Regulations, or SEBI ICDR Regulations. These regulations require 20% of fully diluted post-offer equity capital to be locked in for 18 months from allotment as minimum promoters’ contribution. Zetwerk states that the promoters’ post-offer shareholding will be below 20%, which creates the need for shares from non-promoter holders.

The 15.86% figure is a fully diluted pre-offer measure, not a final post-offer ownership estimate. Fully diluted capital includes equity shares that would result from the conversion of compulsorily convertible preference shares, or CCPS, and the exercise of vested options under employee stock option plan, or ESOP, schemes. The prospectus leaves the final number and percentage of shortfall shares blank because these will be completed in the prospectus after the offer price is finalised.

Which shareholders will fill Zetwerk’s promoter-contribution shortfall?

Eight specified shareholders have given separate consent letters to contribute shares towards Zetwerk’s minimum promoters’ contribution shortfall. They are Accel India V (Mauritius) Limited, Greenoaks Capital Opportunities Fund II LP, Greenoaks Capital MS LP - Gotham Light and Power Series, KAE Capital Fund II, Lightspeed India Partners II, LLC, Lightspeed India Partners III, LLC, Lightspeed Venture Partners Select IV Mauritius and Peak XV Partners Investments V.

The eight holders collectively own 684,893,300 fully diluted equity shares, equal to 44.54% of Zetwerk’s fully diluted pre-offer equity capital. Their combined ownership is materially above the promoters’ 15.86% stake, but the prospectus states that shares counted as their contribution cannot exceed 10% of Zetwerk’s post-offer paid-up equity capital. Therefore, the 44.54% holding describes the pool available to support the shortfall rather than the number of shares that will necessarily enter the 18-month lock-in.

Among the specified shareholders, Peak XV Partners Investments V is the largest disclosed holder, with 140,032,098 shares and a 9.11% fully diluted stake. Greenoaks Capital Opportunities Fund II LP holds 132,138,346 shares or 8.59%, while Accel India V (Mauritius) Limited holds 118,729,425 shares or 7.72%. Lightspeed Venture Partners Select IV Mauritius holds 72,314,953 shares or 4.70%, and KAE Capital Fund II holds 55,669,714 shares or 3.62%.

Do the contributing shareholders become Zetwerk promoters?

No, the eight specified shareholders will not become Zetwerk promoters as a result of contributing shortfall shares. Zetwerk states that these shareholders are not, and have not at any time been, identified as promoters under applicable law. The prospectus further says their participation in the minimum promoters’ contribution will not result in promoter identification.

The mechanism is a consent-based regulatory lock-in rather than a change in ownership classification. Zetwerk’s promoters and each specified shareholder have consented severally, rather than jointly, to include enough of their shares in the locked-in pool to reach 20% of fully diluted post-offer equity capital. From the date of the red herring prospectus until the lock-in is marked, the participating holders have agreed not to sell, transfer, pledge or otherwise encumber the relevant shares, except as permitted under applicable law.

The Lightspeed entities have a separate disclosure concerning voting arrangements. Lightspeed India Partners II, LLC, Lightspeed India Partners III, LLC and Lightspeed Venture Partners Select IV Mauritius are treated as persons acting in concert, or PACs, with Lightspeed Frontier I-MP and Lightspeed Frontier I-MD L.P. under an inter-se voting arrangement. The prospectus says this PAC status applies only in relation to Zetwerk and the proposed transaction, including the consent to contribute shortfall shares.

What lock-in will apply to Zetwerk’s promoter-contribution shares?

Shares counted as Zetwerk’s minimum promoters’ contribution will be locked in for 18 months from the allotment date. This lock-in applies both to promoter shares and to the specified shareholders’ shares that are ultimately designated as PC Shortfall Shares. The final lock-in table in the prospectus is incomplete, so it does not yet show the allocation of shares among the eight outside holders.

Zetwerk has also disclosed a separate six-month lock-in framework for pre-offer equity capital from allotment. The stated exceptions include equity shares transferred in the offer for sale, shares allotted under ESOP schemes, and specified holdings of venture capital funds, Category I and Category II alternative investment funds, or AIFs, and foreign venture capital investors, subject to the applicable SEBI ICDR Regulations. Holders individually or with PACs owning more than 20% of fully diluted pre-offer capital do not receive the stated relaxation under Regulation 17(1)(c).

Eligibility matters because not every existing share can count towards minimum promoters’ contribution. Zetwerk confirms that shares used for the contribution are in dematerialised form, are not pledged or otherwise encumbered, and were not acquired in the immediately preceding year below the public offer price. The company also confirms that the eligible shares did not arise from bonus issues funded by revaluation reserves or unrealised profits, or from other bonus shares that would be ineligible under the regulations.

How were pledged promoter shares addressed before the lock-in?

Zetwerk says the pledged promoter shares proposed for minimum promoters’ contribution were released from pledge before the red herring prospectus was filed. Before that filing, 28,461,344 promoter-held equity shares, representing 1.85% of fully diluted pre-offer capital, were pledged. A further 73,742,459 shares held by promoter-group members and Creative Innovation Private Limited, representing 4.80%, were pledged or subject to non-disposal undertakings.

Catalyst Trusteeship Limited, acting as debenture trustee, provided a consent and non-objection letter dated March 27, 2026. Under that consent, 18,769,460 equity shares and 258,839,940 CCPS held by promoters were released from pledge before the red herring prospectus. Another 69,658,660 CCPS, equivalent to 41,670,806 equity shares on a fully diluted basis, were released from non-disposal undertakings before the updated draft red herring prospectus.

The releases were targeted rather than a full removal of security over promoter-group holdings. Zetwerk states that other pledged shares, excluding the promoter shares offered for sale and the securities released for the minimum-contribution process, will continue to be pledged under Regulation 17. For the contribution calculation, however, Zetwerk undertakes that none of the pledged promoter shares proposed as minimum promoters’ contribution were subject to a pledge from the red herring prospectus date.

Conclusion

Zetwerk’s 15.86% fully diluted promoter stake means compliance with the 20% post-offer minimum promoters’ contribution requirement depends on consent from outside financial shareholders. The eight specified holders provide a large ownership base of 44.54% of fully diluted pre-offer capital, but their contribution is capped at 10% of post-offer paid-up equity capital and does not give them promoter status.

The next disclosure to watch is the final prospectus, which is expected to state the exact number and percentage of PC Shortfall Shares after the offer price is finalised. It should also complete the lock-in table showing how many shares each promoter and specified shareholder contributes for the 18-month period.